On August 15, the U.S. Department of Housing and Urban Development (HUD) released a revision to long-burdensome regulations on FHA-insured mortgages for condominium homeownership. The changes are scheduled to go in to effect on October 15, 2019.
This revision includes, but is not limited to, the following changes/additions:
- Approval term of entire property/project now extended to 3 years (formerly 2 years).
- Simplification of approval recertification process.
- Exception now available to entire property/project reserve fund minimums (currently 10% of the association’s budget), if a reserve study, completed in the past 36 months, justifies the lower reserve amount.
- Adjustment to the owner-occupied and investor-owned ratio approval minimum to 35%.
- Adjustment to the mixed-use commercial and residential ratio approval maximum to 45%.
- Adjustment of the FHA-insured to non-insured mortgage concentration to 75%.
- Expansion of “spot approvals”, or approval of a single unit when the entire property/project is not approved.
Simply put, these changes broaden the opportunity for millions of potential homebuyers to purchase condominium units with FHA-backed loans. FHA loans are a popular choice for many first-time homebuyers, as the program requires a down-payment as low as 3.5% and credit score requirements are lower than most conventional loans.
Condominium association board members and property managers should stay apprised of the FHA-insured mortgage approval guidelines, as compliance is not only a good measure of association health but also an opportunity expand the pool of potential buyers when a unit is for sale.
If your condominium, townhome, or homeowner association is concerned about due diligence during the sale of a unit, do not hesitate to contact our law firm. Since 1985, KSN has been a legal resource for community associations throughout the Chicagoland area. We have multiple offices including downtown Chicago, Mundelein, and Naperville. Call 855-537-0500 or visit www.ksnlaw.com to get started.
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